ZipCap, a start-up in San Diego, is providing loans based on “loyalty capital.” Testing a system that quantifies customer devotion, ZipCap is lending money based on the total dollar commitment customers make through a pledge to a specific business. Their mission is to fund local Mom and Pop neighborhood establishments.
I think it’s a great concept and novel idea. What if every company could ask their customers to put in writing how much they will spend in the future? The response would be telling and in this case, the foundation for acquiring needed capital to make improvements and grow the business.
The article about ZipCap appeared in the New York Times. The story focuses on Beezy’s Café in Ypsilanti, Michigan. The restaurant, which just celebrated their six-year anniversary, employs 16 people. They do a thriving breakfast and lunch business and recently extended hours to serve dinner on Fridays and Saturdays. They wanted to get a loan to help with their operations, but were turned down by two banks since financial institutions consider this type of establishment a risky venture. The owner and founder, Bee Roll, has no collateral. She rents her home and leases the restaurant’s space. The most valuable asset she has, which is the most valuable asset of every company, are loyal customers.
According to ZipCap’s website, “We turn customer loyalty into a line of credit. ZipCap is the loyalty program that helps customers reward their favorite local businesses. With access to affordable capital, these businesses can hire more people, make improvements (i.e. a new outdoor seating area) or expand their offering in other ways. Unfortunately, banks won’t lend to most of these businesses and the other options for capital are too costly to consider. Access to a line of credit through ZipCap will make a huge difference.”
ZipCap’s merchants start by recruiting an “Inner Circle” of customers who pledge to spend a set amount of money in a fixed period of time. ZipCap provides loans based on a percentage of those pledges. Businesses need to accumulate at least 100 Inner Circle members to qualify for a loan. When Bee Roll asked people to become part of their inner circle, it was easy to find members. ZipCap helped to cement an even stronger bond between Beezy’s Café and its most devoted customers.
For years I have been asking companies to disclose their “at risk” factor, a concept I think is important for any business.” All businesses carry insurance for many purposes: property and casualty, workman’s compensation, professional liability, etc. But, what about their insurance coverage to assess their customer devotion? While it’s not an exact science, by asking customers, “using a scale of 1 to 5, how likely are you to continue doing business with our organization over the next year?” helps your business establish its “at risk” factor.
I really like the concept of customers committing their loyalty and dollars to a company. Most Mom and Pop stores understand how to show their customers they count. They know their names, give them a big smile when they walk in the door, ask them about their day before ever asking about their order, and when they leave, say, “I can’t wait to see you tomorrow.”
I had the pleasure of speaking with Evan Malter, ZipCap’s founder and chief executive officer. He told me, “It’s worth noting we turn loyalty into access to capital but also the accessing of capital into loyalty. By engaging customers in this process, they feel a stronger bond with the business and have a better understanding of their impact. This creates greater loyalty and stronger referrals.”
ZipCap has created a fantastic business model. I’m so pleased that they found a way to quantify the value of loyal customers. Kudos to them for creating a new formula to help companies that know how to provide the ideal customer experience.